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Published in Print: January 12, 2000, as Once Again, States Expect Brimming Coffers

Once Again, States Expect Brimming Coffers

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With state economies giving every sign of barreling through another year of growth, many lawmakers have once again set their sights on increased education funding. Among the goodies they hope to deliver in 2000 are expanded early-childhood programs and pay raises for teachers.

State legislators don't envision a spending spree, however, even with the first year of tobacco-settlement payments rolling in. As many legislative sessions begin this month, leaders are more likely to continue their pattern of balancing spending increases with tax cuts and budget reserves.

"It's yet another year that, from a fiscal perspective, is simply too good to be true," said Donald J. Boyd, the director of the Center for the Study of the States at the Rockefeller Institute of Government in Albany, N.Y. "States have been wary about this enormous growth of revenue, building up fund balances and in many cases giving temporary or one-time tax cuts."

In fact, state spending has moderated in the past five years, compared with the past 20 years. It has averaged a 5.3 percent increase since 1995, well below the 1979-2000 average rise of 6.8 percent, according to a report from the National Governors' Association released last week.

Biggest Boost to K-12

The same survey also found that the largest spending increase over the past five years was for elementary and secondary education, which rose by just over 7 percent, slightly more than the 20-year average increase for all spending. In this year's budgets, general-fund appropriations for precollegiate education are up 6.8 percent over last year, a preliminary survey of 44 states conducted by the National Conference of State Legislatures found in the fall.

In the full report released last week, the NCSL reported that, as of halfway through the fiscal year, at least 20 states would end with revenue that exceeded their initial estimates, while another 29 states and the District of Columbia anticipate that revenue will be on target. Only Louisiana has downgraded its original revenue estimate, the report says.

"Clearly, states are doing real well," said Arturo Perez, a senior policy specialist for the NCSL fiscal-affairs program. "Year-end balances are at their highest level since 1980 ... [and] reserves are at their highest level in 20 years."

But that fiscal health both encourages spending and creates pressures to cut taxes—pressures that legislatures are likely to respond to this year as they have in the past several, Mr. Perez said.

At least a dozen states said their legislatures were on track to consider tax cuts, with leaders in other states expected to make official announcements of tax-cut proposals soon, according to the NCSL report. Overall, lawmakers have enacted tax and fee reductions that exceed the worth of tax and fee increases in each of the six previous years, with 42 states providing such reductions in the current fiscal year, the NGA report says.

Another competitor to education spending is health care. State expenditures in that area have been rising and now form more than a quarter of most state budgets. The federal Congressional Budget Office estimates an increase of 7.5 percent in Medicaid spending for the current fiscal year, up from an increase of almost 5 percent last year.

Teacher Salary Hikes

But many lawmakers see urgent needs on the school front as well. In Oklahoma, for example, leaders have watched teachers cross the border for higher-paying jobs in Texas following that state's across-the-board salary increase of $3,000 last year.

"It's going to be a legislative priority to do as much as we can to ratchet up salaries," said Amanda Paliotta, the director of the Oklahoma Senate's fiscal staff.

With revenues from the booming oil business and $4.8 billion in tobacco-settlement money flowing into state coffers, Ms. Paliotta said, "right now ... we can provide some things we normally wouldn't have."

Oklahoma legislators, who will convene next month, are also interested in money earmarked for better teacher benefits, wiring schools for computers, and training teachers in the use of technology, Ms. Paliotta added.

Teacher quality, including technology training, and early-childhood education are likely to be themes in many states, said Dane Linn, the director of education policy studies at the Washington-based National Governors' Association.

"I think we'll see a resurgence in interest in early childhood, especially among the governors who were elected two years ago," Mr. Linn said, pointing to the new First Steps program in South Carolina as one example. The program, which aims to give children a better start in life and prepare them for school, has the backing of Gov. Jim Hodges, a Democrat who took office last year.

Administrators of the program, which will soon make its debut in three South Carolina counties but is expected to spread to all 46, are asking the legislature for $10 million in the coming fiscal year to add to the $20 million allocated in 1999.

In preparation for the session that begins this week, Democratic lawmakers have announced they will seek a 5.3 percent raise for South Carolina teachers. The proposal is partly a response to neighboring North Carolina and Georgia, which have recently pegged their teacher salaries to the national average.

Vol. 19, Issue 17, Pages 19,22

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